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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): July 16, 1996
NUCLEAR METALS, INC.
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(Exact name of Registrant as specified in its Charter)
MASSACHUSETTS 0-8836 04-2506761
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(State or other (Commission (IRS Employer jurisdiction
incorporation) File Number of Identification No.
2229 MAIN STREET, CONCORD, MASSACHUSETTS 01742
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(Address of Principal Executive Offices) (Zip Code)
(508) 369-5410
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS
DENIAL OF NRC EXEMPTION
The Company is required to maintain certain licenses issued by the
United States Nuclear Regulatory Commission ("NRC") in order to possess and
process depleted uranium materials. Under applicable licensing regulations
pertaining to Decommissioning and Disposal ("D&D") at licensed sites, the
Company was required to submit and did submit to the NRC a Decommissioning
Funding Plan ("DFP") to provide for the possible future decommissioning of
its Concord facility. The Company is also required to provide financial
assurance for such decommissioning pursuant to 10 CFR 40.36(e)(4).
Approximately 96% of the depleted uranium materials to which the DFP
requirements apply were processed by the Company for the United States
Government. Based on the terms of certain contracts that the Company entered
into with the United States Government to process such depleted uranium
materials, the Company believes that such materials continue to be owned by
the United States Government and that the United States Government is
obligated to pay for its percentage of the eventual decommissioning costs at
the Concord site. Consistent with this view, the Company has been advised by
its consultants that the United States Government traditionally has paid for
decommissioning contractor facilities which support Government programs when
they no longer are needed. In fact, the Government already has provided
substantial funding for disposal and decontamination of obsolete equipment
located at the Concord site, although the Government has not formally
acknowledged responsibility for decommissioning obligations. (With respect to
the cost of remediation of a holding basin located at the Concord site, the
use of which has been discontinued, the United States Army has encouraged the
Company to pursue Government funding pursuant to Public Law 85-804 on the
grounds, INTER ALIA, that the funding is required to support a private
company whose activities are essential to the national defense.) The
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Company's DFP reflected its position that it is obligated to provide
financial assurance only with respect to the portion of the materials at the
Concord facility which are attributable to the Company's commercial
production for parties other than the United States Government and that this
obligation was satisfied by a $750,000 letter of credit issued by the
Company's bank.
In December, 1994, NMI and NRC officials participated in an
enforcement conference to discuss what the NRC described as the Company's
apparent lack of compliance with the D&D regulations. On August 15, 1995, the
Company submitted a written request for partial exemption from certain
aspects of D&D requirements. The exemption request included alternative
financial funding mechanisms not specifically provided for in the D&D
regulations relating to that portion of required financial assurance for the
DFP that the Company believes is the responsibility of the United States
Government. In support of this request, the Company noted its position that
the United States Government is obligated for the remaining D&D costs and
that, as a matter of both contract and policy, should be expected to
eventually fund such costs.
By letter dated July 16, 1996, the NRC's Division of Nuclear
Materials Safety (Region 1) (the "Division") denied the Company's request for
partial exemption from certain aspects of the D&D funding requirements and
directed that, within 60 days of the Division's letter, the Company provide
satisfactory financial assurance from either the Company or Governmental
sources. In its letter, the Division indicated that it will accept, as a
satisfactory assurance, a Statement of Intent ("SOI") in compliance with 10
CFR 40.36(e)(4) from the United States Army or another Governmental agency to
the effect that such agency intends to fund any costs for which the Company
has not directly provided financial assurances, subject to public
appropriation of the required funds. The Company and the NRC have followed-up
with the United States Army in an effort to satisfy the NRC requirements, as
the Company currently does not have sufficient funds to provide financial
assurance for the entire cost of D&D at the Concord site. The Company
continues to believe that the Army will provide assurance for its portion of
the potential decommissioning costs. The Company is also considering, among
other things: a direct appeal of the Division's decision to the NRC; or a
petition, pursuant to 10 CFR 2.208, to request that the Commission amend or
rescind the D&D regulations. There can be no assurance that any action taken
by the Company in response to the Division's denial of the requested
exemption, or in response to any future enforcement action, will be
successful.
In its letter, the Division indicated that failure to meet the NRC's
requirements by September 14, 1996, may result in enforcement action. Such
enforcement action could be in the form of a civil penalty, license
modification or suspension or license revocation. Although the Company may
also appeal any such enforcement action, such an action could have the
practical effect of preventing the Company from fulfilling its obligations to
a substantial portion of its customer base and, accordingly, could have a
material and adverse impact on the Company's results of operations and
financial position.
The Company believes it is currently the sole source to the US Army
of certain products which are investment cast with the Company's patented
beryllium aluminum alloy and which are vital to certain Army programs. The
Company also believes that its capabilities with respect to the conversion of
UF 6 gas to depleted uranium metal stock make it strategically important to
any future depleted uranium production which may be required for US Army DU
penetrators and tank armor (although current inventories appear sufficient to
supply announced procurement needs). The Company believes that its production
capabilities may also be used to serve several Department of Energy needs for
remediation of certain other environment hazards posed by the process of
Nuclear power generation. For these reasons, the Company believes that the
interests of the United States Government would be best served by the
Company's continued operation under its current NRC licenses, but there can
be no assurance that the various Governmental agencies served by NMI will
take timely or favorable action to provide financial assurances to the NRC or
provide such other relief as may be required to permit the Company's
continued operation under the licenses.
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UNCERTAIN BANK FINANCING
The Company has notified its bank concerning the denial of the
partial exemption requested from the NRC, as discussed above. The Company is
currently reviewing with the bank the impact of the NRC Division's denial on
both future advances and outstanding balances. At this time the bank has not
indicated what action it will take as a response to the NRC Division's denial
of the requested exemption. Any decision on the part of the bank to refrain
from advancing additional funds could have a material adverse impact upon the
Company's results of operations and financial condition. Any acceleration of
the repayment of outstanding indebtedness to the bank could have material
adverse impact upon the Company's operations and financial condition.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NUCLEAR METALS, INC.
By: /s/ James M. Spiezio
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James M. Spiezio, Vice President
of Finance and Administration and
Controller
Date: July 23, 1996
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